ENERGY

The present and the future

Africa in a low oil price world: current trends and the future of oil and gas on the African continent

Oil and gas are the vital resources that influence economic motion and serve as indispensable segments of human needs. And considering that South Africa consumes around 180 billion cubic feet of gas a year and remains heavily reliant on imports, with two-thirds of total gas consumption being imported from Mozambique, the big question remains: how will current trends determine the future of the industry in South Africa—and on the continent?

With plans to more than double South Africa’s generation capacity by 2025, we need to seek out new supply lines and Mozambique needs to continue the development of its supply chain, says Christine Davidson, Vice-President: dmg-ems africa, the event organiser of the 2016 Oil & Gas Africa event to be held from 6 to 8 September at the Cape Town International Convention Centre.

Looking at the situation in Southern Africa, there is currently a strong focus on South Africa’s Ibhubesi gas field, 105km off the Northern Cape coast, and developing that will be a priority during 2016. It is the largest proven gas field in the country, with deposits, including the surrounding Orange Basin, to supply the country’s current gas needs for more than two decades.

Australia’s Sunbird Energy, which holds a 76% stake in the joint Ibhubesi venture alongside national oil company PetroSA’s 24%, signed an agreement with electricity supplier Eskom last year and it is expected to begin supplying the Ankerlig power station, north of Cape Town in 2018.

Opportunity caught up with Davidson to find out more about the future of oil and gas on the African continent and the importance of conferences such as Oil & Gas Africa 2016 for the oil and gas industry.

How will the ongoing discoveries in Africa’s on- and off-shore oil fields impact global oil and gas dynamics?

If you mean worldwide, then Africa’s reserves will be a vital part of the supply in the future. Energy is an international business and the big multi-nationals will want to work in partnership with governments. That won’t change. It is up to those governments to ensure that they facilitate new supply and to work with the expertise internationally, whilst at the same time still ensuring jobs and a financial return for their people and countries.

Oil and gas is of critical importance to the African economy. Can you expand on what can be done to further boost the success of the industry?

Operators want security for their investments. They need to know that they can invest safely within a secure legal framework. There is a lot of evidence that governments across the continent recognise this and are trying to move that way. The winners will be those who can guarantee that security.

The sharp drop in international oil prices since mid-2014 will have varying effects on African economies. What impact will this have on African GDP growth and current account balances?

All the indications we have are that the oil and gas sector worldwide is reacting to the changes wrought by lower prices and is moving forward, knowing that there is little prospect of the days of USD100-plus a barrel returning any time in the foreseeable future. For Africa, like emerging economies across the world, lower oil prices are not all bad news. It means energy is cheaper and because of that, infrastructure and economies can grow faster, especially those countries that have to import oil and gas. And in turn that means bigger, wealthier markets for oil and gas suppliers in the future.

What are the biggest challenges currently hampering growth in the oil and gas market in South Africa and in Africa in general?

Challenging markets rely so much on key industry forums. It is where they can come together to keep abreast of the very latest developments, find out where opportunities lie and so importantly connect with other industry professionals to share experiences. Oil & Gas Africa 2016 provides exactly such an opportunity in a perfect setting in Cape Town.

The new date in September takes this prime show away from a crowded time for energy shows globally and now puts it two months before the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) in the UAE. dmg events Middle East acquired Oil & Gas Africa as part of a portfolio from EMS Africa in March this year, and it’s a key show for future growth with new forums and conferences. dmg runs energy shows across the world, including ADIPEC, which is the Middle East and North Africa’s biggest event for the oil and gas sector. The show in Abu Dhabi last November attracted record numbers of exhibitors, with more than 85 000 visitors—despite the slump in oil prices. New owner dmg-ems will benefit Oil & Gas Africa 2016 by leveraging its worldwide expertise and bring it to southern Africa. Oil & Gas Africa 2016 is the only engineering supply chain exhibition and its last edition attracted visitors from 29 countries.

What can delegates and visitors expect?

At this year’s Oil & Gas Africa, a three-day conference, which runs as part of the show, will focus on the increased sustainable extraction of oil and gas and how governments across the continent are encouraging foreign investors to meet energy needs. This is one of the vital areas of focus. With oil and gas prices more than half what they were two years ago, the whole industry is moving its focus to ensure profitability, especially from existing suppliers. Ongoing discoveries of reserves across Africa have played an important part in economic growth and investors around the world are focused on the continent, so we have to ensure we host the conference at a time in the year where key players can easily attend. The Africa Progress Report 2015 said: “Sub-Saharan Africa may be starved of electricity, but the region is extraordinarily rich in energy assets. Measured in terms of technical potential, the power-generation capacity of gas, coal and hydropower resources vastly exceeds existing levels of power generation.” The report was released by the Africa Progress Panel (APP), chaired by Kofi Annan, former Secretary-General of the United Nations and Nobel laureate, which advocates equitable and sustainable development for Africa, The report also said: “No region has more abundant or less utilised renewable energy potential. Decentralised power generation and distribution systems are opening up new possibilities for reaching populations currently bypassed by national grids.” This gives a framework for the future of the oil and gas sector in Africa and the expo will reflect that.

Can you please tell us about the history on the event in terms of why the conference was initiated and what prompted its birth in 2004?

Cape Town became a focus for the repair of oil rigs and shipping for Africa and there was an appetite in the sector for a new expo in the city. The first Oil & Gas Africa expo was organised in association with the South African Oil & Gas Alliance (SAOGA) as a biennial co-located with the established fishing and maritime expos. The South African government also positioned Cape Town as a centre for oil rig maintenance, building on existing success and the expo reflected that. The show has evolved over the past 12 years and co-locates with our logistics event at the Cape Industry Showcase (CIS). The acquisition of owner EMS by dmg events ME in March this year is part of Oil & Gas Africa’s growth and progression, utilising the knowledge and experience of dmg events worldwide.

Why is this such an important conference for industry in Africa and South Africa?

Oil & Gas Africa has established itself as a place to see the technologies and services for the whole sector attracting upstream, midstream and downstream exhibitors. But equally importantly, this is a forum for people from across the industry to meet. A place where they can discuss technologies, the industry and the future. The industry has gone through a dramatic change in the past two years. The world has entered a new reality with oil prices and there is little prospect of an increase for maybe a decade.

A lot has been written about the negative side of falling oil prices but there are positives, especially for Africa. For example, a low oil price is good news for growing economies. The effect of falling prices so far has been a change in the world balance and producers too have undergone revisions to the way they extract oil and gas and in the way they supply it. South Africa itself has the eighth-largest shale gas reserves in the world. The Americans have shown the world that shale oil and gas can be extracted economically and provide national energy security. So, the world is re-learning how the oil and gas market will operate and across Africa. Those lessons will be incorporated into future extractions. Numerous energy firms, including Shell, Falcon Oil & Gas and Bundu Gas & Oil, have long sought permission to explore shale gas potential in the Karoo Basin in the south of the country. While commercialising domestic reserves remains a long-term priority, South Africa is relying on a new 2 600km pipeline from Mozambique to help bolster supply in the medium term. Mozambique has an estimated 100 trillion cubic feet of proven natural gas reserves, according to press reports, making it the third-largest holder in Africa after Nigeria and Algeria. As show organiser, dmg has an enviable position of operating energy shows across the world and as a company, we will bring that knowledge to South Africa.